Renewable Energy Memo

February 14, 2010

Senate Jobs Bill Resuscitates Alternative Fuel Credit

Filed under: Biofuels, Renewable energy jobs — Tags: , , , — Jonathan B. Wilson @ 7:51 am

 Senate Finance Committee Chairman Max Baucus, D-Mont., and Ranking Member Chuck Grassley, R-Iowa, last week released a draft of their Hiring Incentives to Restore Employment (HIRE) Act.

The bill contains a number of provisions intended to spark new hiring, including a social security tax holiday for workers hired during 2010.

Of interest to the renewable energy industry is the bill’s provision to extend the alternative fuel mixture credit for another year.  The AFM credit, which expired December 31, 2009, was omitted from other tax extender bills submitted earlier, but under the HIRE Act would be extended through 2010. 

The HIRE Act would also revise the definition of “liquid fuel derived from biomass” under 6426(d)(2)(G) to exclude black liquor.  This Senate Finance draft version of this jobs bill differs from House legislation.  The House Ways and Means extenders bill allowed the 6426(d)(2)(G) “liquid fuel derived from biomass” provision to expire as of 12/31/09.  Both versions would also extend the cellulosic biofuel credit under Section 40 of the Internal Revenue Code and would likewise exclude black liquor from its definition.

The lapse of the alternative fuel mixture credit has created substantial problems for the biofuels industry and many plants were shuttered at the end of the year.  New financings have come to a halt as project developers are waiting to see whether the tax credit program will be extended.  Extending the excise tax credit program should re-start many of those plans.

October 19, 2009

IRS Memo Provides Guidance on Black Liquor Tax Credits / Producers May Continue to Obtain Credits through 2012

Filed under: Biofuels, CleanTech investing, Uncategorized — Tags: , , , , — Jonathan B. Wilson @ 10:10 am

 A recently-published memorandum from the Office of the Chief Counsel of the IRS may provide additional guidance to biofuels producers on their ability to obtain tax credits. (IRS Chief Counsel Advice 200941011).

The memorandum, penned in June but publicly-released in October, 2009, concludes that (1) ‘black liquor’ generated in a kraft mill in the paper manufacturing process may qualify as “liquid fuel derived from biomass” under IRC Section 6426(d)(2)(G), (2) the combination of black liquor with at least 0.1%diesel creates an “alternative fuel mixture” for purposes of determining the alternative fuel mixture credit under Section 6426(e) and (3) black liquor may also qualify for the cellulosic biofuel producer credit under IRC Section 40(b)(6) but a producer may not utilize both the mixture tax credit (under 6426(e)) and the producer tax credit (under 40(b)(6).

The analysis is important because the mixture credit amounts to only $0.50 per gallon (and requires the addition of diesel or another taxable fuel) while the cellulosic biofuel credit amounts to $1.01 per gallon and does not require any fuel mixing.

Even more importantly, the mixture credit program expires at the end of 2009, while the cellulosic biofuel credit continues until the end of 2012, so producers who are contemplating a sunset of their mixture credits at the end of the year could have three more years of credit under the cellulosic biofuel program.

Most pulp and paper producers are currently receiving the 50 cent alternative fuel mixture credit. In order to receive the $1.01 cellulosic biofuel credit, producers will have to take the additional step of registering under the EPA Renewable Fuel Standard Program.

October 2, 2009

Gevo Offers Biobutanol Retrofits for Ethanol Producers

Filed under: Biofuels, CleanTech investing, Emissions Cap and Trade, Energy Blog — Tags: , , , — Jonathan B. Wilson @ 7:37 am

Biofuels Digest reports that Gevo has launched a 1 MGY biobutanol plant in St. Joseph, Missouri.

Butanol is formed through fermentation, like ethanol, but has a higher energy value and a lower vaporization profile.  This makes butanol an ideal drop-in fuel for existing gasoline vehicles or as a supplement to biodiesel.

Gevo has also announced the formation of Gevo Development to develop a fleet of biorefineries based on converting existing ethanol plants to Gevo’s proprietary technology for biobutanol.  The new company will be managed by Mike Slaney and David Black, who co-founded and raised over $430 million to capitalize ASABiofuels. In August, 2007, VeraSun Energy Corporation acquired ASAB, its three ethanol production facilities (totaling 300 million gallons per year of ethanol capacity) and three development sites for $725 million.

Gevo CEO Pat Gruber said that the “Gevo Development’s business model is open — it will include acquisitions, joint ventures and tolling arrangements providing flexibility to existing owners and lenders.”

September 22, 2009

Producers Applaud (Mostly) for S.B. 1589

Filed under: Biofuels, Energy Blog — Tags: , , — Jonathan B. Wilson @ 7:11 am

After several weeks to review the bill, producers are responding with mixed, but mostly positive, praise for S.B. 1589, according to Biodiesel Magazine. 

As industry leaders responded to Biodiesel Magazine’s questions about the proposed changes, some strongly disagreed with NBB’s applause of the measure in Washington to convert from a blender excise tax credit to a producer excise tax credit. “I don’t understand their wanting to change that,” said one NBB member, who asked not to be named. “I don’t see the sense or the advantage in it.”

The source indicated that producers who sell B100 are able to keep their books clean because they don’t file any claims with the Internal Revenue Service. This allows them to bill the $1 per gallon credit into their sale price and let distributors, who blend the fuel, deal with the paperwork. “It usually takes about 10 days for us to get paid by our customers,” said the source. “When you’re dealing with the federal government, 45 days is good.”

Delays in repayment impact producers who must tie up more of their own capital while they wait for cash.  “I understand that it’s a cash flow issue,” said Bobby Heiser of Bulldog Biodiesel. “But most of the time we’re the blender of record anyway, so we’re already dealing with the IRS. The way that this change will make it easier for us will be by eliminating B99.”

Management at Lake Erie Biofuels, a plant with a 45 MMgy capacity in Erie, Pa., agreed. “We sell maybe a couple of truckloads of B100 while B99 makes up almost 90 percent of our total sales,” said Michael Noble, director of operations at LEB. “Changing the excise tax will be better for our customers, but it doesn’t change our position.”

Most analysis was positive, however, with the only constant criticism being that the extention (at five years) was too short.

August 7, 2009

New Biodiesel Tax Bill

Filed under: Biofuels, Uncategorized — Tags: , , , — admin @ 6:16 am

Senate Finance Committee member Sen. Maria Cantwell (D-WA) and ranking Republican Charles Grassley (R-IA) yesterday introduced a bill that would modify and extend the existing tax credit program for biodiesel.

The Biodiesel Tax Incentive Reform and Extension Act of 2009  would:

• Change the incentive from a blender credit to a production tax credit.  Producers of biodiesel would qualify for the entire $1/gallon credit without the need to blend their fuels with taxable (petroleum) fuels.    

• Provide the $1 per gallon tax credit for the production of biodiesel, renewable diesel and aviation jet fuel that complies with fuel standards and Clean Air Act requirements that define qualified fuels under current law.

• For small producers, those with an annual production capacity of less than 60 million gallons, the credit increases from $1 to $1.10 for the first 15 million gallons of biodiesel produced.

• Simplify the definition of “biodiesel” to encourage production from any biomass-based feedstock or recycled oils and fats.

• Simplify the coordination between the income tax credit and the excise tax liability to tighten compliance and reduce administrative burdens on taxpayers.

• Extend this tax credit for five years, eliminating the uncertainty from the pending expiration at the end of 2009.

The bill is not yet available for download from Thomas but a pre-publication copy is available here.

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